Wednesday, September 17, 2008

We Think We Just Made a 160k Bad Investment . . .

Now, where's our bailout? Seriously, 85 billion dollars!? Why . . . we could occupy Iraq for a few months for that much scratch . . . . And if we listen to Gregg Easterbrook (yea, brother of that guy on the Seventh Circuit), it's will be we (younger people) who are going to have to suck it up:

In 1976, the entire U.S. national debt was about $800 billion, converted to today's dollars. Last summer, Congress without debate and with barely any notice added $800 billion to the national debt ceiling -- raising that ceiling by an amount equal to the entire debt a generation ago. With no debate! The U.S. national debt was $5 trillion in 1997, and has doubled to almost $10 trillion since. Why aren't the young outraged? The old are acting irresponsibly -- spending like crazy but unwilling to tax themselves, then handing the bill to the young. If the young were spending borrowed money like crazy, the old would be lecturing them. How come in Washington, the old can get away with behavior that would be called reckless for the young?

At any rate, the moment another $800 billion worth of borrowing was authorized, supposedly for "emergency" purposes, lobbyists got to work trying to seize every penny now. The big three automakers are now asking Congress for $50 billion of that $800 billion, supposedly to retool to build the fuel-efficient vehicles they had no way -- just no way on Earth -- of knowing they would ever be required to build. As Paul Ingrassia pointed out in last week's Wall Street Journal, when Congress bailed out Chrysler in 1980, the deal was structured so that if the company recovered, taxpayers got most of their money back. But what's being asked for now is pure subsidy -- money taxpayers will never see again, and that will be used in part to fund the bonuses of overpaid auto executives who got their companies into trouble in the first place. (The Journal opposes the bailout, though the $50 billion would go to Corporate America.) Ingrassia further notes that when Chrysler's Lee Iacocca tried to weasel out of the deal and keep the money that was promised back to taxpayers, Ronald Reagan stood firm and would not budge. Contrast Reagan's sense of civic responsibility to the current president and Congress, both of which just cannot wait to give away other people's money.

That was written a few days ago - before the AIG bailout announcement! Call us crazy, but we're just not getting why we're covering for AIG/Bear Sterns/Fannie Mac/Freddie Mae's (Lehman too? Give it time . . . ) bad investments. We thought the whole point of capitalism was that when you take a risk, you get to reap the reward, but you also have to . . . you know . . . bear the risk? If the government is going to bail out a mega-company everytime it screws up, wouldn't be better to just regulate up front? It would certainly be cheaper, in any event.

This, incidentially, is why Obama needs to lift the payroll tax cap and raise the highest marginal tax rates. It's not that he has has a radical program of new spending (just a shift in priorities from war and corporate welfare to fixing our national infastructure), it's also that he needs to curb the ballooning debt that keeps getting worse under Bush.

Yes, we *know* that some dems are behind the bailout. But the same people who are throwing up their hands and sighing. And not everyone was in favor of the idea:

House Speaker Nancy Pelosi quickly criticized the rescue, calling the $85 billion a "staggering sum." Ms. Pelosi said the bailout was "just too enormous for the American people to guarantee." Her comments suggested that the Bush administration and the Fed would face sharp questioning in Congressional hearings. President Bush was briefed earlier in the afternoon.

Hrmmm... Do the feds no longer get to use Bank of America as their preffered lender either?

Tuesday Morning Quarterback: The Good, The Bad, and the Ugly of Week 2 [ESPN]
Socialism , 21st Century Style [NYT]
U.S. Seizes Control of AIG with $85B Emergency Loan [WaPo]


Anonymous said...

"If the government is going to bail out a mega-company everytime it screws up, wouldn't be better to just regulate up front?"

but that would be anti free markets!

Rule 12 (f) said...

I knows!

FFJ said...

Our options:

1. No regulations + Bail out
2. Reasonable regulations of financial markets... no bail out
3. No regulations... no bail out.

Which one of these do you think GOP candidate John McCain prefers? (HINT: Irony Alert!)

Rule 12 (f) said...

Ha, exactly. Rule 12 f wonders how this election is even close.

(Irony alert - we favor #2)